Specialty Stores Rock Retailing

February 9, 1986|By Janet Key, Chicago Tribune

NEW YORK — Back in the recession-plagued days of the early 1980s, the chief bugaboo for America's traditional retailers was the off-price competitor who slashed prices on national brand and designer goods by 30 percent to 70 percent -- and attracted price-conscious customers in droves.

But times changed, the recession faded, and customers who once shopped pipe-rack emporiums for Calvin Klein sweaters at half the price they sold for in department stores now prefer smaller stores like The Limited, Banana Republic, Crate and Barrel.

Off-pricers, once described as ''the wave of the future,'' now face a future that one speaker at the recent convention of the National Retail Merchants Association summed up in two words: ''bleak'' and ''dismal.'' The new chief bugaboo is the specialty store.

''Successful retailers will be those who zero in on the shifting preferences of known consumer groups,'' said William R. Howell, chairman of J.C. Penney Co., the country's third-largest retailer. ''Microspecialization will be the buzzword of the 1990s.''

Other retailers agree. '' 'Business as usual' is as dangerous as driving with your eye on the rear-view mirror,'' said Stanley Goodman, president of Top Management Services Inc. in St. Louis and former chairman of May Department Stores Co. ''We're going to have to come up with new approaches.'' To do that, retailers will need to adopt the rigid specialization that propelled direct-marketing businesses -- including L.L. Bean, Williams-Sonoma and The Sharper Image -- into the industry's ''most successful, fastest- growing'' segment, Goodman said.

''They're ringing up $100 billion in annual sales, identifying different segments of the population and targeting their merchandise selection, their advertising and even their store design just to that group,'' Goodman said. ''We're whistling Dixie if we think we can get by without bringing our marketing skills up to those standards.''

Arnold Aronson, chairman of Batus Retail, which has put 40 percent of its U.S. retail operations -- including its Gimbels and Frederick & Nelson department stores -- up for sale, said successful retailers have only two choices in the next few years: ''Either strive for a geographic market dominance or lay effective claim to a specialty niche.''

Leonard Lauder, president of Estee Lauder Inc. cosmetics, goes a step farther. ''The broadly based department store carrying everything for everybody is a thing of the past,'' he said. ''Every store is going to have to deal in a narrower clientele and service customers better.''

The same poll cited such conventional stores as R.H. Macy & Co., Dayton- Hudson, Bloomingdale's (a division of Federated Department Stores Inc.) and May Co. -- all of whom have adopted specialty-store strategies -- as being among the most successful.

Much of the customer shift away from department stores and mass merchandisers has been brought about by the stores themselves, industry observers and retailers said at the convention.

A badly overbuilt retail industry -- square footage in shopping centers alone increased 80 percent between 1974 and 1984, although the U.S. population increased only 12 percent -- spawned a fiercely competitive market. That competition, exacerbated by the emergence of off-price retailers three years ago, led to a market dependent on price-cutting to hype sales.

Price-cutting, however, gradually convinced consumers to buy only ''sale'' goods, squeezing already strapped store profits even harder. As profits declined, struggling retailers began betting only on sure winners -- basic goods that every other retailer also carried.

The result? Bored consumers, who had been taught by off-pricers and discounters not to trust so-called ''list'' or sticker prices anyway, turned to the more carefully selected merchandise in fashion-conscious, timesaving specialty stores.

''Specialty stores that fill a niche, especially those that offer services to busy, time-conscious customers, will continue to flourish,'' Penney's Howell said.

As one consultant put it, at the same time that retailers were ''shooting themselves in the foot'' by emphasizing low prices, American society was undergoing a fundamental shift. George Rosenbaum, president of Leo Shapiro & Associates Inc., a Chicago consulting firm, calls it ''the unbundling of America.''

''A few years back, all family shopping was bundled in the hands of one member, the lady of the house,'' he said.

''Stores were designed, stocked and located to be arenas for family shopping, where one woman could find everything she needed for the entire family,'' Rosenbaum said.

''But when the lady of the house went to take a job, the family began to unbundle. Family members began doing things for themselves at home, . . . and everybody began going out to shop,'' he said.

''When family members shop for themselves and know precisely what they want, a traditional departmentalized store becomes less useful,'' he said, ''and a specialty store . . . becomes more useful.''